Court of Appeal rules in BBC’s favour in pensionable pay case

The Court of Appeal has dismissed an appeal against the BBC in a long-running pensions case after the broadcaster introduced a 1% cap on increases in pensionable salary in a move aimed at reducing its defined benefit (DB) pension schemes deficit.

In the case of Bradbury v British Broadcasting Corporation, the Court of Appeal also dismissed claims that the BBC’s conduct amounted to a breach in the implied duty of trust and confidence, which arises from an employee’s employment contract.

The BBC introduced the cap, stating that only 1% of any future pay increases would be pensionable, for active members of its three DB schemes in December 2010. At that time, Bradbury was a member of the New Benefits section of the scheme, a career average arrangement.

Bradbury brought a claim to the Pensions Ombudsman on the grounds that he had contributed to the scheme in good faith that his pensionable salary amounted to his basic salary. The Pensions Ombudsman dismissed the case on the grounds that it was open to the BBC to determine that only part of the Bradbury’s salary was pensionable.

Bradbury appealed this decision to the High Court in 2012, and as a result the case was referred back to the Pensions Ombudsman. The ombudsman reached its second determination in 2013, again finding that there had been no breach of the BBC’s terms, duty of trust and confidence. Bradbury appealed this decision to the High Court again in 2015 where it was dismissed, before subsequently appealing to the Court of Appeal.

This latest appeal considered whether the definition of basic salary enabled the BBC to determine whether a pay rise could be included as basic salary when calculating pensionable salary. It also discussed whether the 1% cap was a breach of the pension scheme rules, whether the cap also breached the Pensions Act 1995 by breaking the link between pay and pensions, and whether the BBC breached its implied duty of trust and confidence by trying to agree the cap with employees individually.

The Court of Appeal dismissed the appeal. It found that the BBC could decide whether an increase in pay counted as basic salary and was thus entitled to limit any increase in basic salary in determining pensionable pay. This is linked to the definition of basic salary and therefore pensionable salary as not including any other allowances, bonuses, overtime earnings or temporary or fluctuating emoluments. The judge stated that, based on this, there was no link between pay and pensions, and that Bradbury had no right to any pay rise.

The judge also confirmed that the cap was not a breach of the 1995 act, because it was in employees’ best interests. If the cap had not been implemented, more drastic action may have been required to cope with the pension scheme’s deficit. The judge also clarified that the act is applicable where a person has a right to a future pension, not where an individual may acquire a right to a pension, for example, in relation to a future pay increase.

In the court documents, Lady Justice Gloster stated: “In my judgement, the [previous] judge’s analysis of the relevant facts, and his conclusion that there was no breach of the respondent’s duty of trust and confidence, cannot be faulted. The respondent’s conduct had to be assessed against the reality of the background that the respondent was faced with a multi-billion pound deficit in the scheme and where the trustees, the unions and the respondent all agreed that something had to be done.

“All employees were given the same choice, either to accept the cap or not, so there was no question of differential treatment.”

A BBC spokesperson added: “We are pleased that the Court of Appeal has agreed with the previous decisions of both the Pension Ombudsman and the High Court in relation to the BBC’s 2010/11 pension reforms. The reforms have, and continue to play, an important role to help address the scheme’s funding deficit and pension costs.”